Implementing the Project Management Balanced Scorecard

Jessica Keyes

• Publisher: CRC Press
• Year: 2010
• Print ISBN: 9781138374324
• eBook ISBN: 9781439857144
• Topic: Business
• Subtopic: Project Management
• Index: Business

Business managers have long known the power of the Balanced Scorecard in executing corporate strategy. Implementing the Project Management Balanced Scorecard shows project managers how they too can use this framework to meet strategic objectives. It supplies valuable insight into the project management process as a whole and provides detailed explanations on how to effectively implement the balanced scorecard to measure and manage performance and projects.

The book details a tactical approach for implementing the scorecard approach at the project level and investigates numerous sample scorecards, metrics, and techniques. It examines recent research on critical issues such as performance measurement and management, continuous process improvement, benchmarking, metrics selection, and people management. It also explains how to integrate these issues with the four perspectives of the balanced scorecard: customer, business processes, learning and innovation, and financial.

Filled with examples and case histories, the book directly relates the scorecard concept to the major project management steps of determining scope, scheduling, estimation, risk management, procurement, and project termination. It includes a plethora of resources on the accompanying downloadable resources—including detailed instructions for developing a measurement program, a full metrics guide, a sample project plan, and a set of project management fill-in forms.

Chapter 1

Balanced Scorecard and the Project Manager

A study of 179 project managers and project management office managers found that although most organizations understood the importance of effective project management, they simply do not do a good job of managing their project management (PM) process. This translates to project outcomes less stellar than expected.

There are many different stakeholder groups involved in a typical project (e.g., business process users, owners, users, business managers, clients, etc.) so it is understandable that each of these stakeholder groups has different goals and objectives for assessing project outcomes. At the most basic level, the triple constraint methodology (time, cost, quality) is most often used to assess project success. However, many now believe that triple constraint does not account for the varied dimensions of projects that need to be considered in their assessments. Current research in this area finds that there is a real lack of agreement on not only what constitutes project success, but on methods for more comprehensive assessment of project outcomes (Barclay, 2008).

Given the varied dimensionality of a typical project, some have argued that there needs to be a distinction between PM success, in terms of the traditional triple constraints of time, cost, and quality, and project success, which is aligned with the product outcome of the project, and discerned through the stakeholders. Thus, it is quite possible to experience product success, but not PM success.

It is by now obvious that the traditional project measures of time, cost, and quality need to be enhanced by adding some additional project measurement dimensions, such as stakeholder benefits (e.g., customer satisfaction), product benefits (competitive advantage, financial rewards), and preparing for the future (e.g., value, personal growth, etc.; Barclay, 2008).

Quite a few studies (Barclay, 2008; Lynn, 2006) suggest that an adaptation of the balanced scorecard business approach to performance management measurement provides just this sort of vehicle. Robert S. Kaplan and David P. Norton developed the balanced scorecard approach in the early 1990s to compensate for shortcomings they perceived in using only financial metrics to judge corporate performance. They recognized that in this new economy it was also necessary to value intangible assets. Because of this, they urged companies to measure such esoteric factors as quality and customer satisfaction. By the middle 1990s, balanced scorecard became the hallmark of a well-run company. Kaplan and Norton often compare their approach for managing a company to that of pilots viewing assorted instrument panels in an airplane cockpit: both have a need to monitor multiple aspects of their working environment.

In the scorecard scenario, as shown in Figure 1.1, a company organizes its business goals into discrete, all-encompassing perspectives: Financial, Customer, Internal Process, and Learning/Growth. The company then determines cause–effect relationships: for example, satisfied customers buy more goods, which increases revenue. Next, the company lists measures for each goal, pinpoints targets, and identifies projects and other initiatives to help reach those targets.

Departments create scorecards tied to the company's targets, and employees and projects have scorecards tied to their department's targets. This cascading nature provides a line of sight among the individuals, the projects they are working on, the units they support, and how that affects the strategy of the enterprise as a whole.

Figure 1.1 The balanced scorecard.

For project managers, the balanced scorecard is an invaluable tool that permits the project manager to link a project to the business side of the organization using a “cause and effect” approach. Some have likened balanced scorecard to a new language, which enables the project manager and business line managers to think together about what can be done to support or improve business performance.

A beneficial side effect of the use of the balanced scorecard is that, when all measures are reported, one can calculate the strength of relations among the various value drivers. For example, if the relation between high implementation costs and high profit levels is consistently weak, it can be inferred that the project, as implemented, does not sufficiently contribute to results as expressed by the other (e.g., financial) performance measures.

This first chapter examines the fundamentals of balanced scorecard as it relates to the precepts of project management. Balanced scorecard is examined in relationship to the organization and the people, processes, technologies, and products that are components of the organization's discrete projects, programs, and collaborative efforts.

Adopting the Balanced Scorecard

Kaplan and Norton (2001) provide a good overview of how a typical company adapts to the balanced scorecard approach:

Each organization we studied did it a different way, but you could see that, first, they all had strong leadership from the top. Second, they translated their strategy into a balanced scorecard. Third, they cascaded the high-level strategy down to the operating business units and the support departments. Fourth, they were able to make strategy everybody's everyday job, and to reinforce that by setting up personal goals and objectives and then linking variable compensation to the achievement of those target objectives. Finally, they integrated the balanced scorecard into the organization's processes, built it into the planning and budgeting process, and developed new reporting frameworks as well as a new structure for the management meeting.

The key, then, is to develop a scorecard that naturally builds in cause-and-effect relationships, includes sufficient performance drivers, and, finally, provides a linkage to appropriate measures, as shown in Table 1.1.

At the very lowest level, a discrete project can also be evaluated using balanced scorecard. The key here is the connectivity between the project and the objectives of the organization as a whole, as shown in Table 1.2.

Table 1.1 Typical Departmental Sample Scorecard

Table 1.2 A Simple Project Scorecard Approach

The internal processes perspective maps neatly to the traditional triple constraint of project management, using many of the same measures traditionally used (as discussed in this book). For example, we can articulate the quality constraint using the ISO 10006:2003 standard. This standard provides guidance on the application of quality management in projects. It is applicable to projects of varying complexity, small or large, of short or long duration, in different environments, and irrespective of the kind of product or process involved.

Quality management of projects in this International Standard is based on eight quality management principles:

1. Customer focus
2. Leadership
3. Involvement of people
4. Process approach
5. System approach to management
6. Continual improvement
7. Factual approach to decision making
8. Mutually beneficial supplier relationships

Sample characteristics of these can be seen in Table 1.3.

Characteristics of a variable (e.g., quality, time, etc.) are used to create the key performance indicators (KPIs), or metrics, used to measure the success of the project. Thus, as you can see from Tables 1.1 through 1.3, we've got quite a few choices in terms of measuring the quality dimension of any particular project.

Example: FedEx

There are three key measurement indicators applied at FedEx. The goal of the customer-value creation indicator is to define a customer value that is not currently being met and then use technology to meet that need. Ultimately, the information produced by the system should be stored for analysis.

A hallmark of the “FedEx way” is that they really listen to their customers and create services to fu...

Table of contents

• Cover
• Halftitle Page
• Title Page
• Copyright Page
• Table of Contents
• Foreword
• Preface
• Acknowledgments
• About the Author
• 1 Balanced Scorecard and the Project Manager
• 2 Aligning the Project to Meet Strategic Objectives
• 3 Aligning the Project to Meet Financial Objectives
• 4 Aligning the Project to Meet Customer Objectives
• 5 Aligning the Project to Meet Business Process Objectives
• 6 Aligning the Project to Promote Learning and Growth
• 7 Balanced Scorecard and Project Scope Management
• 8 Balanced Scorecard and Project Scheduling
• 9 Balanced Scorecard and Project Estimation
• 10 Balanced Scorecard and Project Risk
• 11 Balanced Scorecard and Procurement Management
• 12 Balanced Scorecard and Project Termination
• Appendix A: Business Strategy Primer
• Appendix B: Value Measuring Methodology
• Appendix C: Establishing a Measurement Program
• Appendix D: Selected Performance Metrics
• Appendix E: The Malcolm Baldrige National Quality Award Program
• Appendix F: The Feasibility Study and Cost–Benefit Analysis
• Appendix G: Project Plan Outline Project DeDS—The Dog e-Dating System ID – PRJ01
• Appendix H: Project Management Glossary
• Appendix I: Staff Competency Survey
• Appendix J: Behavioral Competencies
• Appendix K: Balanced Scorecard Best Practice Metrics for Projects
• Appendix L: Benchmarking Data Collection Techniques
• Index